The Pet Market Future of Click Plus Brick
Anyone not living under a rock heard the news. In a move that sent shock waves through the global grocery business, on June 16, Amazon announced its intention to purchase Whole Foods for $13.7 billion. At a glance, aside from the obvious e-commerce angle, this may seem peripheral to pet, as Whole Foods accounts for only about 1 percent of U.S. retail sales of pet products, with Amazon at maybe 5 percent. But with time, the impact of the acquisition could be felt across all categories of groceries and consumables, possibly changing the way millions of Americans shop.
Perhaps most significantly, the Amazon/Whole Foods merger can be viewed as marking the point at which brick and click must be concurrent, with the world’s largest e-tailer suddenly also invested in brick-and-mortar, and the world’s largest brick-and-mortar retailer aggressively building out online, including via its $3.3 billion purchase of Jet.com. As of May 2017, Walmart had sales of $485 billion (roughly three times the level of No. 2 CVS Health), and Amazon had sales of $136 billion, according to Forbes’ “World’s Biggest Public Companies” compilation—and Amazon is without peer online. As The New York Times (June 21, 2017) recently reported, “[Amazon] has captured 43 percent of all internet retail sales in the United States, with half of all online shopping searches starting on Amazon. In 2016, it had more than $63 billion in revenue from online sales in the United States—or more than the next 10 top online retailers combined.”
What does the coming together of brick and click mean in the context of pet product retailing? Here’s one prediction for the not-so-distant future. While kicked back on the couch at home, Lily opens her PetSmart or Walmart or Whole Foods app and clicks on the items she wants—or calls out “Alexa.” Because she’s a regular shopper, most of these are saved into a list based on previous purchases or one of Lily’s own custom lists, which can be tweaked to exclude or add items. During the process, she’s offered specials based on her user profile and purchase history (but not so much as to hinder the process), with loyalty rewards flagged and factored in, and when she is done shopping, she consummates the sale with a click or voice command—though not before choosing between in-store pickup or home delivery. With the former, she has the option of scanning additional items into her order using her pay-equipped smartphone during a stroll through the aisles. On the way out, with the help of an in-store associate (formerly known as a cashier), she retrieves her online purchase from a staging area, and if she desires—that cat litter is heavy—has the purchase loaded into her car.
Chains like PetSmart and Walmart already have the brick-and-mortar wherewithal to make this vision a reality, and in addition to its 450 Whole Foods stores, Amazon is testing a new Amazon Go format and “click and collect” stores, conceivably growing into the thousands of units. Yes, we’re talking massive investment in new stores and remodels, not to mention yet-to-be-worked-out logistics in store and online. But we’re also talking massive convenience benefits for the shopper and, for the savvy retailer, with a little luck, extreme customer loyalty bolstered by an ever-growing selection of available-here-only store brands. And, make no mistake, with Amazon kicking in, we’re talking sooner rather than later.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of MarketResearch.com, which recently published its annual U.S. Pet Market Outlook report (packagedfacts.com).